Two trades to watch: GBP/USD, DAX

GBP/USD looks to 1.39 after upbeat retail sales and ahead of PMI numbers. Dax hovers around its all time high, with US tax hikes & German PMI figures due.

Charts (4)

GBP/USD tests 50 EMA resistance after strong retail sales 

Retail sales data showed that spending ramped up as consumers looked ahead to the reopening of the UK economy. 

Retail sales came in 5.4% MoM in March vs 1.5% expected and 2.1% in February. On an annual basis sales rose 7.2% in March against 3.5% expected and -3.6% previously. 

UK PMI data for April will be in more closely eyed as it will provide clues as to how the economy responded to the reopening in April. Expectations are for the service sector PMI to hit 59 in April. 

Weakness in the US Dollar is seen as it gives back yesterday’s gains on Biden tax reports and stronger than forecast initial jobless claims.  

US PMI data is due later. 

Where next for GBP/USD? 

GBP/USD has pushed back over its descending trendline dating back to late February. It is attempting to retake the 50 EMA on the 4 hour chart, which holds just above the 100 EMA. 

A move above this level could see the pair attempt to take 1.3885 a swing low from Thursday before targeting 1.3950 and 1.4010. 

Support can be seen at 1.3820 the daily low followed by 1.38 the round number which has acted as both a support and resistance this month. 

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Can PMI data help the Dax higher?

European bourses look set for a softer open after a lower close on Wall Street.  

Concerns of higher US taxes on reports that the White House is mulling over a substantial hike to capital gains taxes for higher earners has sent stocks southwards. 

Yesterday the ECB retained their dovish slant. 

German & European PMI data is in focus.  The composite reading for both is expected to tick slightly lower but remain in expansionary territory. 

Where next for the Dax? 

The Dax trades above the upper band of the ascending channel which dates back to December. The Dax also trades above its 20 & 50 EMA suggesting that its in an upward trend.  

However more recently the trend has run out of steam and we have been seeing some consolidation at these levels. 

The upper band of the channel held as support earlier in the week. This upper band continues to off er immediate support at 15134 which is also the confluence with the 20 EMA and horizontal support across April. This could prove a tough nut to break. 

A fall below here could open the door to 14800 the late March high followed soon after by the 50 EMA. It would take a fall below this level to negate the current uptrend. 

Any mover higher would need to take 15360 high March 31, in order to look northwards towards the all time high of 15515. Beyond here there is no resistance to speak of but round numbers could become targets. 

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